Best bare trust accounts for cash

Reaper

I agree any trust (bare, discretionary etc) can include savings accounts, but I have always been a bit mystified by simple child savings accounts set up without one.

I'm on weak ground here as it is not something I have ever needed to research but they seem to automatically get the same benefits of counting the income as belonging to the child, and the same limitation of the parental £100 rule. Are they effectively all Bare Trusts, or something else?

xylophone

Would a Junior ISA be suitable?

The child may not be eligible for a JISA. If he does have one, or he is eligible and one is set up, or he has a CTF, the grandparents can indeed contribute.

I agree any trust (bare, discretionary etc) can include savings accounts, but I have always been a bit mystified by simple child savings accounts set up without one.

It is a question of control - while it is true that a bare trust set up by parents would be subject to the £100 rule, they would still have control over the assets until age 16/18 as appropriate.

If an account is in the child's own name, even though the interest would be subject to the £100 rule if the capital were provided by the parent, the child would have control over the account assuming that he had reached the age specified by the account provider.

anandp

I'll pop into a local Virgin branch and ask the question about bare trusts. If one of their child savings accounts can be operated in this way, then that's the way to go!

xylophone

I'll pop into a local Virgin branch and ask the question about bare trusts. If one of their child savings accounts can be operated in this way, then that's the way to go!

See http://bank.virginmoney.com/savings/find/results/childrens-accounts/new/
And http://bank.virginmoney.com/savings/learn/childrens-accounts/
"If you’re a parent, grandparent, aunt or uncle, it’s never too early to
choose to put away a regular amount each month with our Virgin Young Saver.

The Virgin Young Saver will be automatically transferred into an appropriate adult savings account on 5th April, following the child’s 16th birthday. We will ask you whether the account should retain the trustee status, in which case the interest must be paid net, or, if the trustee status is to be removed – the child may be eligible to register a form R85 in their own right."

So the Account starts with bare trustee status - after child reaches age 16, if trustee status is retained, any R85 must be rescinded and tax reclaimed by the parent using R40.

The child is entitled to access and control at age 18.

flipiter

Hi,
It is not directly related to your question but is there any way of holding money or investments for a child but not allowing them access until they are 25.
We currently have the money in Smart account with Nationwide for my children aged 11 and 13. It has accumulated over the years into more than I would be happy giving to an 18year old. Who knows what they may be like at 18? Are there any trusts available that would allow us to retain control until they are 25?
Also, some of the money is from Grandparents and some from child benefit. Is the child benefit money legitimately theirs?
Thankyou for any replies.

xylophone

You might have a problem here with tax on the existing accounts because of the so called £100 rule.

See explanation here from Virgin money http://bank.virginmoney.com/savings/learn/childrens-accounts/ñ
http://www.hmrc.gov.uk/helpsheets/r85-helpsheet.pdf

This is why it is always better to keep money given by parents (outside tax privileged savings eg CTF/JISA/NSI Children's bonds) separate from that given by others.

With regard to the CB it belonged originally to the parent who received it but once placed in the child's account became an absolute gift to the child - any interest arising on such a gift would be subject to the £100 rule.

All the money that is now in the NW accounts belongs absolutely to your children and they have the right to access either at the age permitted by the account or at 16/18 at the latest.

With regard to holding money that belongs to the children under your control up to the age of 25 this can only be achieved by setting up a formal trust and the tax rules are complex.
https://www.gov.uk/trusts-taxes/types-of-trust
http://www.hmrc.gov.uk/trusts/types/index.htm

anandp

xylophone wrote: »

See http://bank.virginmoney.com/savings/find/results/childrens-accounts/new/
And http://bank.virginmoney.com/savings/learn/childrens-accounts/
"If you’re a parent, grandparent, aunt or uncle, it’s never too early to
choose to put away a regular amount each month with our Virgin Young Saver.

The Virgin Young Saver will be automatically transferred into an appropriate adult savings account on 5th April, following the child’s 16th birthday. We will ask you whether the account should retain the trustee status, in which case the interest must be paid net, or, if the trustee status is to be removed – the child may be eligible to register a form R85 in their own right."

So the Account starts with bare trustee status - after child reaches age 16, if trustee status is retained, any R85 must be rescinded and tax reclaimed by the parent using R40.

The child is entitled to access and control at age 18.

Thanks for this. I can't find where this account transfers to the child at 16 or 18? I think you've said it turns into an adult's account, but control only comes after 18 - is that right?

xylophone

http://bank.virginmoney.com/savings/learn/childrens-accounts/
This is the page you want.
"The Virgin Young Saver will be automatically transferred into an appropriate adult savings account on 5th April, following the child’s 16th birthday. We will ask you whether the account should retain the trustee status, in which case the interest must be paid net, or, if the trustee status is to be removed – the child may be eligible to register a form R85 in their own right."

Any tax overpaid is reclaimed by the Trustee on form R40.

The child is entitled to access and control at age 18.